Trouble is brewing for Landcadia Holdings (NASDAQ:LCA) today. Shares of the blank-check company were down as much as 5% after the opening bell, and they are still lingering in the red. But with no news about its pending SPAC merger, what is happening to LCA stock? Dive in below.
As a quick refresher, Landcadia Holdings came public back in May 2019. Just over a year later, the special purpose acquisition company announced it had agreed to a reverse merger with Golden Nugget Online Gaming. With the $745 million SPAC merger awaiting shareholder approval, LCA stock has been red hot. Why?
Well, because Golden Nugget Online Gaming offers investors access to the online betting market. Following a Supreme Court decision in 2018, states around the country have opened their doors to sports books. As the legal landscape has changed, so have the investing opportunities. Golden Nugget Online Gaming and a variety of companies have sprung up to make online betting happen. Additionally, with casinos closed due to the novel coronavirus, the market is hotter than ever.
That is why LCA stock has been so popular. When the reverse merger closes, Golden Nugget Online Gaming will start trading under the ticker GNOG. Investors should know that the company faces tough competition and is working to expand, but that has not stopped the enthusiasm. Year to date, shares of Landcadia Holdings are up almost 90%.
As investors look at the downward move in LCA stock today, one reason could be that they are tired of waiting for the reverse merger. When will shareholders take a vote? And when can they expect GNOG stock to start trading?
However, there is another big reason why LCA stock is languishing today…
A Golden Nugget IPO Weighs on LCA Stock
Bloomberg reported yesterday that Tilman Fertitta, the billionaire behind Golden Nugget Online Gaming, has been discussing an initial public offering for some of his holdings. In addition to GNOG, Fertitta owns a variety of casinos and restaurants under the Golden Nugget and Landry’s umbrellas. Currently, Fertitta has casinos in New Jersey, Nevada, Mississippi and Louisiana, and is also working on expanding into Michigan and Pennsylvania.
According to the report, Fertitta is flirting with the IPO idea because of the current stock market rally. Because the billionaire has used debt to fuel company growth, listing a stake in his empire could help him pay down that debt. Additionally, the pandemic has been particularly brutal to his businesses. Fertitta has furloughed thousands of employees and borrowed hundreds of millions of dollars. With the recent investor appetite for all things IPO, a Golden Nugget IPO could be a smart move.
But how does this connect to LCA stock? Well, it may come down to some confusion over the Golden Nugget situation. As it stands, the online gambling properties are set to come public through the separate LCA stock SPAC. Tracking the Bloomberg report, it seems that the IPO would take the physical casino and restaurant business public.
Importantly, investors may be wondering just what this will mean for LCA stock and Golden Nugget Online Gaming. How will it affect the post-merger share price to have more of the Fertitta empire publicly traded? It may be too early to tell.
For now, there is no confirmation of the Golden Nugget IPO news. Without a final decision from Fertitta, it looks like LCA stock is simply sinking on rumors. Keep a close eye on the news, and wait for more golden information.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.